BNP Paribas Group: Results as at 31 December 2016

The Board of Directors of BNP Paribas met on 6 February 2017. The meeting was chaired by Jean Lemierre and the Board examined the Group’s results for the fourth quarter and endorsed the 2016 financial statements.

RISE IN INCOME AND SOLID CAPITAL GENERATION

BNP Paribas delivered a good overall performance this year, showing the strength of its integrated and diversified business model.

Revenues totalled 43,411 million euros, up by 1.1% compared to 2015 despite the low interest rate environment and a lacklustre market context this year. They included this year the exceptional impact of +597 million euros of the capital gain from the sale of Visa Europe shares as well as the
-59 million euros in Own Credit Adjustment (OCA) and own credit risk included in derivatives (DVA) (+314 million euros in 2015).

Revenues were up by 0.2% in the operating divisions and by 0.9 % at constant scope and exchange rates given an unfavourable exchange rate. They were down by 0.5% in Domestic Markets(1) (-1.2% at constant scope and exchange rates) due to the low interest rate environment, rose by 1.2% at International Financial Services (+2.7% at constant scope and exchange rates) and decreased by 0.3% at CIB but were up by 1.2% at constant scope and exchange rates despite a particularly challenging market environment in the first quarter of 2016.

Operating expenses, which amounted to 29,378 million euros, were well contained (+0.4% compared to 2015). They included exceptional items for a total of 749 million euro impact
(862 million euros in 2015): 159 million euros in the acquisitions’ restructuring costs(2) (171 million euros in 2015), 395 million euros in CIB transformation costs (0 in 2015), 144 million euros in restructuring costs related to the businesses(3) (0 in 2015) and the 52 million euros compulsory contribution to the resolution process of 4 Italian banks (69 million euros in 2015). They no longer included any costs related to the Simple & Efficient plan (622 million euros in 2015): in line with the target, the final costs related to this plan were booked in the fourth quarter 2015.

The operating expenses of the operating divisions were up by 1.0%: +2.3% for Domestic Markets(1), +2.3% for International Financial Services and -1.8% for CIB. At constant scope and exchange rates, they rose by 0.5%(4) for Domestic Markets, by 3.6%(4) for International Financial Services and 0.1% for CIB. They included the impact of new regulations and of the strengthening of compliance but benefited from the success of the Simple & Efficient savings plan which offset the natural costs’ drift, as well as from the first effects of CIB’s savings plan.

The Group’s gross operating income was up thus by 2.6%, at 14,033 million euros.

The cost of risk was down significantly by 14.1% due in particular to the good control of risk at loan origination, the low interest rate environment and the continued improvement in Italy. It came to
3,262 million euros (3,797 million euros in 2015) or 46 basis points of outstanding customer loans.

The Group’s operating income rose by 10.1% to 10,771 million euros (9,787 million euros in 2015).

Non operating items totalled +439 million euros (+592 million euros in 2015). They included this year -127 million euros(5) in goodwill impairment (-993 million euros in goodwill impairments in 2015(6)). Non operating items also included in 2015 a +716 million euros capital gain from the sale of the residual stake in Klépierre-Corio, a +123 million euros dilution capital gain due to the merger between Klépierre and Corio and a +94 million euros capital gain from the sale of a
non-strategic stake.

Pre-tax income thus came to 11,210 million euros compared to 10,379 million euros in 2015 (+8.0%).

Net income attributable to equity holders was 7,702 million euros, up by 15.1% compared to 2015. Excluding one-off items(7), it came to 7,802 million euros (+6.3%). The return on equity was 9.3% (9.4% excluding one-off items). The return on tangible equity came to 11.1% (11.2% excluding one-off items). The net earnings per share was at €6.0.

At 31 December 2016, the fully loaded Basel 3 common equity Tier 1 ratio(8) was 11.5%, up by 60 basis points compared to 31 December 2015, illustrating the solid capital generation of the Group. The fully loaded Basel 3 leverage ratio(9) came to 4.4% (+40 basis points compared to 31 December 2015). The Liquidity Coverage Ratio was 123% at 31 December 2016. Lastly, the Group’s immediately available liquidity reserve was 305 billion euros (266 billion euros as at 31 December 2015), equivalent to over one year of room to manoeuvre in terms of wholesale funding.

The net book value per share reached 73.9 euros, equivalent to a compounded annual growth rate of 6.2% since 31 December 2008, illustrating the continuous value creation throughout the cycle.

The Board of Directors will propose at the Shareholders’ Meeting the payment of a dividend of €2.70 per share to be paid in cash, equivalent to a 45% pay-out ratio which is in line with the objective of the plan.

The Group is actively implementing the remediation plan agreed as part of the comprehensive settlement with the U.S. authorities and is continuing to reinforce its compliance and control procedures.

The Group’s good overall performance this year illustrates the success of the
2014-2016 business development plan. The average annual revenue growth was 4.0% over the period and the target of 10% return on equity, calculated on the basis of a CET1 ratio of 10%, was exceeded(10).

The Group unveiled the main highlights of its 2017-2020 business development plan. The plan leverages the strength of the integrated and diversified business model and takes into account regulatory constraints which will continue to grow during the period in the current Basel 3 regulatory framework. It is designed to build the bank of the future by continuing the development of the businesses and implementing an ambitious programme of new customer experience, digital transformation and savings. The target is thus to achieve more than 6.5% average annual growth of net income until 2020, a CET1 of 12%(11) in 2020 and a 10% return on equity at that date.

In the fourth quarter 2016, the Group reported a very solid performance. Revenues totalled
10,656 million euros, up by 2.0% compared to the fourth quarter 2015. They included the exceptional impact of -18 million euros in Own Credit Adjustment (OCA) and own credit risk included in derivatives (DVA) (+160 million euros in the fourth quarter 2015).

Revenues of the operating divisions were up by 2.8% compared to the fourth quarter 2015. They were down at Domestic Markets(12) (-1.0%) due to the persistently low interest rate environment but they were up in International Financial Services (+3.1%) and up significantly at CIB (+8.0%) in connection with a favourable market context. The foreign exchange effect this quarter was negligible.

Operating expenses, at 7,444 million euros, rose by only 0.5% compared to the fourth quarter 2015. They included a total of 342 million euros in exceptional items (355 million euros in the fourth quarter 2015): 48 million euros in acquisitions’ restructuring costs(13) (54 million euros in the fourth quarter 2015), 98 million euros in CIB’s transformation plan costs (0 in the fourth quarter 2015), 144 million euros in restructuring costs related to the businesses(14) (0 in the fourth quarter 2015) and the 52 million euros compulsory contribution to the resolution process of 4 Italian banks (69 million euros in the fourth quarter 2015). They no longer included any Simple & Efficient transformation costs (232 million euros in the fourth quarter 2015).

Operating expenses rose by 3.0% for Domestic Markets(12) but were down 0.5% excluding the impact of exceptional items(15) thanks to the effects of cost savings measures. They rose by 3.2% for International Financial Services as a result of the development of the businesses and decreased by 3.2% for CIB thanks to the effect of the cost cutting plan and despite business growth.

The gross operating income of the Group thus rose by 5.6%, to 3,212 million euros.

The cost of risk was down by 1.9% compared to the fourth quarter 2015. It came to 950 million euros (968 million euros in the fourth quarter 2015).

Non-operating items totalled +5 million euros (-502 million euros in the fourth quarter 2015 which included in particular -993 million euros(16) in exceptional goodwill impairments and the 352 million euros capital gain from the sale of the residual stake in Klépierre-Corio).

Pre-tax income thus came to 2,267 million euros compared to 1,473 million euros in the fourth quarter 2015 (+53.9%).

BNP Paribas posted 1,442 million euros in net income attributable to equity holders
(665 million euros in the fourth quarter 2015). Excluding exceptional items(17), it was 1,814 million euros, up by 14.3% compared to the same quarter a year earlier.

(1) Including 100% of Private Banking in the domestic networks (excluding PEL/CEL effects)
(2) LaSer, Bank BGZ, DAB Bank and GE LLD
(3) BNL bc (50 million euros), Belgian Retail Banking (80 million euros), Wealth and Asset Management (7 million euros), Corporate Centre (7 million euros)
(4) Excluding exceptional costs
(5) Full goodwill impairment of BGZ
(6) Of which BNL bc’s full goodwill impairment: -€917m
(7) Effect of exceptional items after tax: -100 million euros in 2016, -644 million euros in 2015
(8) Ratio taking into account all the CRD4 rules with no transitory provisions
(9) Ratio taking into account all the CRD4 rules at 2019 with no transitory provisions, calculated according to the delegated act of the European Commission dated 10 October 2014
(10) 10.3% of return on equity in 2016 (excluding one-off items) on the basis of a CET1 ratio of 10%.
(11) With a constant regulatory framework
(12) Including 100% of Private Banking in the domestic networks (excluding PEL/CEL effects)
(13) LaSer, Bank BGZ, DAB Bank, General Electric LLD
(14) BNL bc (50 million euros), Belgian Retail Banking (80 million euros), Wealth and Asset Management (7 million euros) and Corporate Centre (7 million euros)
(15) BNL bc and Belgian Retail Banking restructuring costs totalling 130 million euros (20 million euros in the fourth quarter 2015) and a 47 million euros compulsory contribution to the resolution process of 4 Italian banks (65 million euros in the fourth quarter 2015)
(16) Of which BNL bc’s full goodwill impairment: -917 million euros
(17) Effect of exceptional items after tax: -372 million euros in the fourth quarter 2016 (-922 million euros in the fourth quarter 2015)